Many Homeowners Looking for Cash Today are Refinancing

How to refinance post-recession


Many homeowners looking for cash today are trying to refinance. A few short years ago refinancing meant showing proof of employment and finding the right mortgage broker, but in today’s market things are different. Now that the recession is over, the number of people trying to refinance is still high, but the number that are actually eligible is low. For anyone trying to refinance, there are definite steps to take to increase the chances of a successful underwriting plan.

The projected rates in the coming year

Experts are citing that the 30-year fixed rate will stay around 5% for 2010, but if the market improves considerably, that rate could reach 5.25%. According to Keith Gumbinger, financial publisher of HSH Associates, a survey of lenders posted the national average of a 30-year rate at 5.01% in April of 2009. The rate for a 5/1 adjustable-rate mortgage is 4.6%. Noting that the difference between the two is so close, Gumbinger said choosing an ARM now is not a wise decision. As inflation increases the rates will go up too, but given the condition of the market, that is highly unlikely in the near future.

Qualifying for good rates

Fannie Mae and Freddie Mac back about 70% of the mortgage loans in the market today. Generally, getting these loans will get you the lowest rates. To qualify for these loans however, applicants must have credit scores of at least 720 and equity of 20% or more. Applicants living in the home they are trying to refinance have a better shot at it and if it’s a single-family home their chances are even higher.

Necessary documentation for a refinance

For anyone looking to refinance, it’s important to be proactive. While in the old days it was simple to get a loan, today’s world has a long list of necessary documentation and potential borrowers who provide information have a better chance of getting refinancing. Providing a prospective lender with your current credit score and an estimate of your home’s value can open the door to refinancing. Homeowners looking for cash today through a refinance need to also provide a month’s-worth of paystubs, two years of W-2s, two years of tax returns and any other pertinent financial documents. Mortgage broker Tracy Tolleson instructs her clients to fill out applications for refinancing and pay for an appraisal prior to formally shopping for the refinance also.

Where to apply for a refinance

When it comes to where to refinance, homeowners should call at least three lenders, including credit unions and local branch offices of national, regional and local banks. Guy Cecala, publisher of Inside Mortgage Finance, said that some banks that previously only served affluent customers are now opening the door to all customers. This is a great time for all potential refinancers to see what the market has to offer.

Refinancing and its benefits

Homeowners in need of cash today should look to refinancing, but with caution. It will take more documentation and effort than ever to actually get a new loan. For those who have a high enough credit score, proof of employment and proof of financial stability, it is a great time to venture into the world of the refinance. Banks and credit unions are at a loss when it comes to good-credit borrowers and are opening the doors wider to new customers.

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